The Myth of the Entrepreneurial Economy : Employment and Innovation in Small Firms

Over the last three decades, modern capitalist economies have experienced significant changes in the structure of industry, the nature of production and the organisation of work. There has been a decline in traditional industries such as manufacturing, construction and mining and a growth in social, personal, financial and commercial services, as well as a stabilisation or decline in public employment (Ebbinghaus and Visser 1999: 141-142). Technological changes have transformed production in modern economies by expanding the possibilities for flexible and decentralised production techniques. There has been an associated increase in the role of knowledge and the importance of product and process innovation. A set of strategies for managing the workforce has emerged in response to perceived changes in the structure of industry and the organisation of production including ‘reengineering’ and ‘de-layering’, which are thought to reflect the increased need for worker participation and autonomy in the new production regime. This paper evaluates the benefits of the entrepreneurial economy by reference to available data and international research evidence on employment generation, conditions of work and innovation in small enterprises in a range of OECD countries . The paper concludes that small enterprises cannot be regarded as superior to large firms in any general sense because most small firms are not innovative, do not contribute to employment growth and do not engage in progressive employment practices. Further, economies in which small enterprises account for a large employment share do not necessarily demonstrate superior economic outcomes in terms of unemployment or industrial competitiveness. The data suggest that a more cautious approach to the entrepreneurial economy is required because the concept of the entrepreneurial economy is closer to a myth than a reality in key capitalist economies.