The success of the entrepreneurial sector depends on the support provided by the state

Student’s Name
Professor’s Name
The investigation sought to understand the role of the government in promoting
entrepreneurial activities through an investigation of the Chinese and US governments’
contribution to the growth of entrepreneurship. Based on the investigation, China has introduced
various policies meant to promote entrepreneurship through the transformation of the key sectors
such as education, manufacturing, infrastructure, and services industries. Equally important, the
US has also taken measures through the introduction of programs to support entrepreneurship
activities. These programs include the Global Entrepreneurship Program and Global
Entrepreneurship Summit. However, it is important to note that China is still a developing
nation, and thus its economy has not matured like that of the US. As such, the US offers a better
entrepreneurial environment, the major difference being the access to funds to finance SMEs.
'The Success of the Entrepreneurial Sector Depends on the Support Provided by the State.’
Assess This Statement Using Evidence From both Developing and Developed Countries.
The small and medium enterprises are a product of entrepreneurial activities within each
economy. SMEs play a huge role in the development of the economy especially within the
emerging and developing markets. However, the success of the entrepreneurial sector is
dependent on several, factors. Among these factors are the individual entrepreneurial skills of a
person and the desire and ability to establish and operate a business. Entrepreneurs are decisive
innovative and have the desire to take a risk and exploit the opportunities within the markets.
However, other factors also play a role in the success of the entrepreneurial sector, such as the
business policies within the market, and the nature of both the public and the private sector.
More importantly, the access to finance and the existing government policies determine the
success of entrepreneurs. Access to finance is a major challenge to entrepreneurs, particularly in
the emerging markets in Africa and the Middle East. As such, the success of the entrepreneurial
sector depends on the financial infrastructure, public sector interventions, legal and regulatory
framework, capacity needs for development, and the emergence of specific sub-segment of focus
on SMEs. However, there is no adequate empirical evidence showing the nature in which the
entrepreneurial sector depends on the governmental support. As such, it is imperative to assess
the role of the government in the success of the entrepreneurial sector using examples from both
developing and developed nations.
Literature Review
According to Hanna (2009 p. 333-335), the current global market is characterized by
various challenges, especially in the key sectors. Multinational corporations and state
corporations were the major players in various economies in the 20
century. However,
globalization intensified the competition in the local industries due to the presence of cheaper
products from the international markets. This contributed o the collapse of various multinational
corporations that could not handle the pressure and competition in the global market. Also, state
corporations were prone to mismanagement and thus could not keep up with the private sector
(Hanna 2009, p. 333-335). One solution introduced was the privatization of the public
institutions to make them more competitive and support the national growth. However, the most
important step by many nations was the promotion of the SMEs to diversify the local markets,
increase competitiveness with global organizations, create employment to the youths, and
contribute to the national economic growth. SMEs are the backbone of the economy of many
developed and developing nations across the globe (Brabant 2012, p. 146-148).
Hoor-Ul-Ain, Hasan, and Sajjad (2014, p. 1440-1441) argue that the SMEs are the
dominant form of business organizations in the global market. According to the research
conducted by the Organization for Economic Cooperation and Development (OECD), SMEs
represent approximately 95-99% of all companies around the globe. OECD further noted that the
SMEs represent over 95% of enterprises and ensure 60-70% of the total jobs. The SMEs play a
crucial role in maintaining the competitiveness of the global industries and in diversifying the
economy, thus avoiding the excessive reliance on the public sector. SMEs are responsible for the
technological milestone achieved around the globe especially with the growth of the Tech
Companies. As such, the promotion of the SMEs has been a priority for most governments as a
way of promoting development and empowering the people.
State Support Given to Entrepreneurial Sector in China
China’s economy has significantly transformed more than any other economy since the
1970s. The most important economic and industrial sectors in China, including communication,
transport, energy, manufacturing, mining, and financial services, were under the control of the
Chinese government by 1978 (Iacob 2015, p. 78-80). The revival of the Chinese economy saw
the introduction of new policies in a bid to boost the economic growth of the nation. This was
followed by the revival of the public sector and the privatization of the state-controlled
companies to improve the national economy. The second stage of the economic reforms came
towards the end of the 1980s and beginning of the 90s which set the stage for the Chinese
entrepreneurs to exploit the cheap cost of production.
The evolution and government promotion of the Chinese economy can be divided into
various generations. The first generation was the promotion of the manufacturing sector at the
beginning of the 1990s. This was the first generation to experience the Chinese economic
reforms and was part of the first group of firms in China (Iacob 2012, p. 17). The success of this
generation was as a result of the better economic policies introduced by the government that
seeks to improve the private sector and also relinquish state control in major industries. The
government introduced incentives to local companies and entrepreneurs seeking to invest in the
manufacturing industry. The first generation is celebrated as the people that significantly
transformed the Chinese economy. These entrepreneurs invested significantly in the
manufacturing business and contributed to the emergence of China as the manufacturing hub
China (Iacob 2012, p. 17).
The second generation was the entrepreneurs within the private sectors which became
popular towards the end of the 1990s. This group contributed immensely towards the growth of
the service industry at a rapid pace and the increase in the income of the entire population. The
government improved the structure of the private sector through incentives to expand the
economy. Also, the implementation of the technology-driven development model by the
government helped increase the number of jobs available in the service industry China (Iacob
2012, p. 18). Moreover, the government improved the education of the population to increase
knowledge and skills in the key sectors of the service industry such as the financial markets.
Likewise, the third generation was the consolidating the global resources due to the
disappointing performance of China in the international markets. The Chinese firms were using
the traditional approaches and the Chinese entrepreneurs were looking for improved global
strategies to enhance their global competitiveness. The government introduced education
programs to the entrepreneurs to improve their skills and knowledge in the global market. Also,
the government sought to counter the effect of imbalance of trade due to increased imports China
(Iacob 2012, p. 19).
Iacob (2012, p. 20) argues that the Chinese government significantly transformed the
entrepreneurial sector through improvement on the traditional education setting. The nation
introduced an energetic and open policy geared towards attracting advanced technology and
promoting the knowledge of the population on new technology. The government improved the
private economy by improving the levels of education to increase the knowledge sources in three
stages. The early stage was achieved through transforming the Chinese society between 1976 and
1986 by enunciation and supporting education by the Chinese government as a strategic
objective (Iacob 2012, p. 20). The second stage occurred between 1987 and 1999 by increasing
the access to education and technology was brought to the top position of the nation’s
development plan through increased knowledge in science and education. Moreover, the third
stage (2000 to present) is geared towards ensuring modernization of the education system by
reviewing the curriculum to ensure students get updated knowledge and skills that are viable in
the current global market (Iacob 2012, p. 20).
The government introduced the laws of the socialist system that facilitated a high level of
participation of women in the Chinese economy. The Chinese government pleaded for gender
equality and sought to promote equality in all areas of the economy, including employment and
education. This has significantly promoted the status of Chinese women and their contribution to
the economy. Currently, the percentage of women employees is 44%, higher than the global
average of 34.5% (Hu and Zhu 2006, p. 33-37). 25% of the women in the working class are
national entrepreneurs, of which 41% are private business owners who conduct independent
activities (Xiaosi 2011, p. 1-8). This shows the government’s role in promoting women
entrepreneurs and its contribution to the employment sector and the economy at large.
According to Zeng (2010, p. 9), the Chinese government established four special
economic zones (Xiamen in Fujian, and Shenzhen, Zhuhai, and Shantou in Guangdong Province)
by 1980. Although the primary goal for the establishment of the economic zones was to enhance
economic development in the region, the government also promoted entrepreneurship. The
government introduced special financial, trade and investment privileges to entrepreneurs
establishing business operations in these regions. The incentives were in the form of tax breaks
and financial aid. The SEZs had an immediate impact, attracting 59.8% of China’s total foreign
direct investment by 1981 (Zeng 2010, p. 9). Additionally, the government also introduced
economic and technological development zones (ETDZs), and high-tech industrial development
zones to achieve the state’s economic agenda. The introduction of such policies and these zones
has significantly promoted the entrepreneurial sector due to access to incentives and other
benefits (Zeng 2010, p. 10)
The Chinese government has introduced policies meant to promote mass
entrepreneurship and innovation as well as promote the growth of start-up companies. The state
government has already set aside Rmb 2.1tn (approximately $320 billion) to invest and support
emerging entrepreneurs in the technology sector. Also, the state approved the introduction of an
integrated digital business license registry system to enable a one-stop registration for the foreign
firms as well as the domestic firms (Robinson 2016, p. 2-5). This mass entrepreneurship and
innovation is an effective driver for economic growth and a consistent transition between
traditional and new growth engines. For instance, the Jinan City municipal authorities offered
Robot Phoenix, an industrial robotics company, Rmb2 million ($300,000) in 2012 to help
develop their business model, which did not need to be repaid (Robinson 2016, p. 6-8). This
shows the commitment of the Chinese government in promoting entrepreneurship and the steps
taken to achieve this and promote economic growth.
State Support Given to Entrepreneurial Sector in The US
The Global Entrepreneurship Monitor identifies several key entrepreneurial framework
conditions that are important to the success of the organization. These conditions include
government policy, entrepreneurship education, commercial and legal infrastructure,
entrepreneurship finance, R & D transfers, entry regulations, physical infrastructure, and
government entrepreneurship programs. According to Kegel 2016( p. 20), entrepreneurship
finance is one of the key determinants to the success of the entrepreneurial activities is the access
to finance for start-ups. The availability of finance in terms of equity and debt for the SMEs is as
a result of the mature and deep financial ecosystem that is present in the US. The existing
financial system in the US has many players in the public and private sectors and boosts the local
businesses. The access to finance is easy in the US, and it is ranked first among the G20 nations
in the EY G2o Entrepreneurship Barometer (Kegel 2016, p. 20).
Kegel (2016, p. 20) argues there are various government entrepreneurship programs that
are aimed at helping SMEs at all levels of the government. There are several business
accelerators and incubators institutions in the US developed to help entrepreneurs launch new
businesses in the US. Although there is a sizable support system in the US, for the
entrepreneurial sector, it is ranked eighteenth among the G20 nations for government support
within the US. However, this is changing, with the increased investment from the Small Business
Administration which set aside $2 billion for entrepreneurial incubators and mentorship
programs. This is part of the Start-up American Partnership that seeks to foster the alliance
between universities, American corporations, foundations of thought, and innovative
entrepreneurs to success the competitiveness and potential of American SMEs (Kegel 2016, p.
21). Likewise, the US has seen a tremendous increase in the availability of college courses
geared towards small business management over the past fifteen years. The US is ranked third in
education and training among the G20 nations (Kegel 2016, p. 21).
R & D transfer is interested in the amount of investment to which the national research
and development will lead to a new commercial opportunity. Investment in research and
development is high in the US and is ranked third among the G20 nations. Equally important, the
US's physical infrastructure is excellent with a balance in the entire nation. Moreover, there are
no entry regulations for foreign investments and companies, thus making it easy to do business
(Kegel 2016, p. 22). Equally, the US government has several policies in place that promotes
entrepreneurship through several mechanisms, including partnering with US companies, investor
groups, and non-governmental organizations. Such programs include the Global Innovation
through Science and Technology (GIST), Global Entrepreneurship Summit (GES), Global
Entrepreneurship Week (GEW), Global Entrepreneurship Program, Mexico-United States
Entrepreneurship and Innovation Council (MUSEIC), and SelectUSA (GES 2017, p. 5-8)
Despite the steps taken by China, its economy s still development and is characterized by
a huge economic imbalance throughout the nation. Although China is a manufacturing hub, its
existing policies are not as mature as in the US. As such, the US has a better entrepreneurial
environment with greater access to funds for start-ups. However, the Chinese market is far much
cheaper due to the presence of incentives that make the factors of production cheaper than in the
US. Jonas et al. (2013, 5-8) further argue that access to funding is the major bottleneck to
entrepreneurial growth in China. China does not have a well-established system of credit, and the
banking system often sets standards that are too high for small businesses. Equally important, the
banking system is operated by the State, and thus the private sector finds access to funds
challenging since the banks in China prefer state-owned enterprises and other low-risk
businesses. Laws in China bars inter-company lending, preventing small businesses from
accessing loans from other businesses. As such, access to finance for SMEs is limited to two
sources: illegal off-the-book loans from loan sharks or friends and equity investment. This makes
the entrepreneurial sector in the US far much better (Jonas et al. 2013, 5-8).
I would recommend an entrepreneur to invest in the US market rather than the Chinese
market. China is a developing economy, and the infrastructure system does not cover the entire
market. Equally important, the banking system in China is not as effective ad mature as the US.
Access to funds is easier in the US, unlike China whereby SMEs can only obtain funds from
illegal off-the-book loans and equity investment.
In conclusion, the entrepreneurial sector is the backbone of the global economy in many
nations. As such, governments have introduced various policies to support the existing system.
China is still a developing nation and has introduced various strategies to support entrepreneurial
activities. The revival of the Chinese economy saw the government introduce strategies to
promote the key sectors of the economy, including education, manufacturing, service, and
transport industries. This was followed by privatization of these sectors and introduction of
incentives to encourage investment from local and global entrepreneurs. Also, the government
introduced laws to encourage participation of women and also formed special economic zones
that offered various incentives to entrepreneurs. On the other hand, the US is a mature economy
with policies and an environment that supports entrepreneurship. However, the US market has a
more conducive environment due to the presence of a stable and strong banking system that
offers funds to entrepreneurs.
Reference List
Brabant, J. M. V. 2012. Privatizing Eastern Europe: The Role of Markets and Ownership in the
Transition. Berlin: Springer Science & Business Media. Doi
GES. 2017. U.S. Government Support for Entrepreneurship in America and Around the World.
Available at Accessed March 8,
Hanna, N. K. 2009. E-Transformation: Enabling New Development Strategies. Berlin: Springer
Science & Business Media. Doi
Hoor-Ul-Ain, S., Hassan, S., and Sajjad, S. 2014. The Role of Public Sector in Promoting
Entrepreneurship: An Analytical Review of Pakistan’s Economy. International Journal
of Scientific & Engineering Research, Vol. 5(10), pp. 1440-1444. Doi
Hu, H., and Zhu, X. 2006. Features of women entrepreneurship in China. Journal of China
Women’s World, Vol. 18(3), pp.33-37.
Iacob, S. V. 2013. Entrepreneurship, Support of the Economic Changes in China. The USV
Annals of Economics and Public Administration, Vol. 14(20), pp. 15-28. Doi
Iacob, S. V. 2015. Entrepreneurship Support of Economic Growth in China (I). EcoForum, Vol.
4(6), pp. 77-83. Doi
Jonas, A., Lai, S., Root, G., and Warriner, R. 2013. Not Exactly Silicon Valley: China’s Distinct
Brand of Entrepreneurship. Available at
entrepreneurship/. Accessed March 8, 2018.
Kegel, P. (2016). A Comparison of Startup Entrepreneurial Activity Between the United States
and Japan. Journal of Management Policy and Practice, Vol. 17(1), pp. 18-26. Doi
Robinson, D. 2016. China puts faith in start-up boom. The Financial Times. Available at Accessed March
8, 2018.
Robu, M. 2013. The Dynamic and Importance of SMEs in Economy. The USV Annals of
Economics and Public Administration, Vol. 13(17), pp. 84-89. Doi
Xiaosi, M. 2011. Women entrepreneurs play a big role in China's economy. English Peoples’
Daily. Available at
Accessed March 8, 2018.
Zeng, D. Z. 2010. Building Engines for Growth and Competitiveness in China: Experience with
Special Economic Zones and Industrial Clusters. Washington DC: The International
Bank for Reconstruction and Development /The World Bank. Doi

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