With the increasing importance of the small firm sector to national economies, there has been a progressive attempt by many governments to develop policies specifically targeted at supporting the development of small firms.
However, given that small firms are meant to operate within a free market economy, why should the government support small firms?
One of the primary arguments for the development of specific small firm policies is that they are disadvantaged in the market relative to larger firms. There are four major areas of market failure that might justify the development of policies to support and promote small scale enterprise.
