ABSTRACT
Almost every country in the world has a set of policy measures directed at small business or entrepreneurship. Why is this? What is this policy intervention trying to achieve? In this chapter we focus on the rationale and justification for government intervention to support entrepreneurship and small firms, outline the alternative policy options which governments have adopted and report some indicators of success. Underpinning the discussion is the economic notion of ‘market failure’ and its implication that without government intervention levels of welfare — reflected perhaps in national GDP — will be lower than with intervention. This leads to a consideration of the wide range of policy options which governments have to consider when supporting small firms. For example, is it sufficient for government to shape the framework conditions within which entrepreneurs operate or are there groups of firms — or potential entrepreneurs — which require more targeted support?
