With the increase in globalization and international commerce, there has been increased attention on the need to safeguard consumer interests and protect domestic economies from the vulgarism of international competition. Consequently, governments have employed strategies for protecting critical sectors of the economy while encouraging competition to promote innovation, creativity and efficiency in utilization of resources. In this regard, academicians and researchers have come up with conflicting perspectives to explain government regulations and its effect on small businesses in a rapidly changing business environment.
This paper critically examines the concept of government regulation and its impact of small businesses. Government involvement in the regulation of human behavior and social interactions is a historical concept that has gained support and criticism from different quarters. Ideally, government regulation is the employment of rules and requirements that govern human behavior and social interactions within a jurisdiction. However, it is notable that regulations are not exclusive to governments but also implemented by authorities to create order and safeguard interests.
One of the areas that have elicited heated debates in recent years is the concept of government regulation and its impact on small businesses. Given the contribution of small businesses in national economic growths, it has become vital for governments to focus on regulatory frameworks to promote entrepreneurships, sustainable creation of wealth and economic growth by strengthening small businesses while protecting them from the stiff competition from the wealthy corporations. Generally, government regulations differ in permissibility and restrictiveness depending on the objectives and prevailing circumstances.
In addition, the intensity of regulations may also differ depending on the objectives while exceptions or deregulations may also be done to reflect government interest in a changing business environment. It is therefore imperative that business entities are forced to comply with these government regulations in their operations within the jurisdiction. These regulations range from incorporation requirements to operations and taxations. In this regard, it is vital for small business owners to understand the business environment and comply with the regulatory requirements.
This includes compliance to city and local authority regulations in the locality of the business unit. The federal government regulations are almost uniform regardless of the business location. Licensing has been one of the ways through which government regulates small businesses. Before starting operations, small businesses are required by law to comply with certain conditions by declaring their nature of business operations, type of industry and goods or services dealing with.
In addition, there are special licenses for some businesses like those who sell particular products like alcohol, foodstuffs and professional services. In addition, small businesses must comply with agency registration requirements which enforce regulatory frameworks by offering certificates for incorporation, tax compliance and employment compliance among others. It is notable that most small businesses are predominantly owned privately and capitalistic in nature (Alexander et al, 7). Most of the operations are geared towards the maximization of profits and continuous creation of wealth.
Ideally, the organization of a small business is determined by several factors including the size of the organization, scope of operations and tax requirements as well as disclosure and compliance requirements. In this regard, it evident that government regulation plays a critical role not only in influencing operations for small business but also shaping the structure and corporate organization. Apparently, government regulation for small businesses is a major issue with varying implications.
In some circumstances, small businesses are not even aware of the regulatory requirements that they must comply with. Although most small business owners appreciate the need to comply with government regulations, there is increasing evidence that the businesses spend a huge portion of their earnings to implement and fully comply with these requirements. Several studies have been done to determine the impact of government regulation on small businesses (Viscusi et al, 29). Some of the studies show that government regulations are one of the heaviest burdens that small businesses shoulder.
One of the studies by the Office of Advocacy revealed that small business pay about 7,000 dollars per worker to comply with federal requirements as compared to large corporations which spend about 4,500 dollars per employee (Sanjay, 5). This statistic reflects a growing trend that undermines entrepreneurship and small business ownership while benefiting large corporations who enjoy economies of scale. Conclusively, the extra cost emanating from government regulation falls harder on small businesses. Conclusion
There is no doubt that government regulation plays a key role in safeguarding consumer interest and creating business order in a rapidly changing business environment. However, it is evident that small businesses spend a huge portion of their revenues to comply with government regulations which undermines innovation and competitiveness as compared to large corporations which benefit from the economies of scale. Given the contributions of small businesses to the national economy, it is imperative that the government must employ strategies for promoting small business entrepreneurship and continuous creation of wealth.
References Alexander, W. R. J. , Bell, J. D. , & Knowles, S. Quantifying compliance costs of small businesses in New Zealand. Discussion Paper. University of Otego, (2004): 4-9 Retrieved May 4th, 2010, from http://www. business. otago. ac. nz/econ/research/discussionpapers/DP0406. pdf. Sanjay, B. Cost of state regulation on California small business study. California State University Sacramento, (2009): 3-8. Retrieved May 4th, 2010 from http://www. sba. ca. gov/Cost%20of%20Regulation%20Study%20-%20Final. pdf Viscusi, W. Kip, J. & Joseph, E. Economics of Regulation and Antitrust. Cambridge, Mass. : MIT Press, (2000): 23-45.