entrepreneurship and the economy

1. Smart City Jakarta
Introduction to
Entrepreneurship
Lecture 4: Entrepreneurship and the Economy

2. Large Business to
the economy

3. Large Business to the economy
Large business according to the theory of economies of scale originated from the industrial revolution ,show that
large business has the advantage of economy of scale in term of productivity and has better innovation, this conclude
that large business could drive economy progress. Based on the time theory was made only large scale firm could
make it to the standard of scale efficiency. However, differently in today's date although large business similarly are
focused more on increasing the capital, replacing the entrepreneurial function. Therefore , larger firm are more
reliant on the market monopoly to delay innovation outcome, in result the larger firm would delay economic growth
alongside(HU, 2010). As a result, large firm are great for investor however, for economic growth or create jobs may
not be as great. Many studies have been done that showed instead of creating a new jobs, large firm actually destroy
and hurt economic growth (Colorda Business Rountable, 2014).

4. Large Corporation’s data
According to IRS data, in 2013 corporation that receive less than $500,000 had a higher profit
than corporation that has more than $250 million in sales (ATKINSON & LIND, 2018). This is
because that the large corporation are to make other ways to obtaining profit such as tax
evasion. However, this claim is not made just on no basis, there proof of big corporation hiring
top notch accountant to be able hide profit to an offshore account just so that it will not
detected by the government. On that note, the large firm are the one who paying 18.2% of the
federal income tax while business that has less than $5million only to have 4.6%. In addition, the
larger corporation are to be audited more often than any smaller business.

5. SMEs Business to the
economy

6. SMEs Business to the economy
The issue of to see whether or not SMEs are beneficial to the economy must be viewed from
many different perspective (HU, 2010). To see the perspective from conventional wisdom from
back in industrial revolution, it is hypothesized that SMEs has no more to grow and the future of
SMEs are expected to be dark, this is because the larger firm were to have more capital and to
compete against a larger firm in term of economy of scale would be impossible. However, to see
form the opposite spectrum, it is seen that SMEs has more advantage than larger firm, as larger
firm does not take priority in improving their productivity compare SMEs. This result SMEs to
have more contribution to economic growth. This is evidence in scholars agurmanetation that
SMEs could increase the economy’s key competitive advantage. This done by the new ideas that
SMEs offer to the market, and noted that SMEs and entrepreneurship is essential in order to
achieve a long run macro economic prosperity (HU, 2010).

7. SMEs Data
pre capital income increase along in employment with their contribution of SMEs.As a result of
pre capital income increase the contribution of unregistered economy decreases. In addition,
SMEs both registered and unregistered contribute up to 60-70% to GDP on average, however
as GDP increase the contribution of unregistered economy decreases (Caner, n.d.).
Making SMEs to dominate the business sector of the business up to 95% in the world,
accounting about 65% of the employment. Resulting SMEs to have a fundamental contribution
to the economy: from 16% of GDP in low-income countries ( although the secor is striving, it
mostly informal) to 51% of GDP in high-income countries.

8. SMEs to International
Economy

9. SMEs to International Economy
Contribution To International GDP
SMEs, by number, dominate the world business stage. Although precise, up-to-date data are
difficult to obtain, estimates suggest that more than 95% of enterprises across the world are
SMEs, accounting for approximately 60% of private sector employment (Ayyagari et al. 2011).
The contribution of SMEs to economic fundamentals nonetheless varies substantially across
countries: from 16% of GDP in low-income countries (where the sector is typically large but
informal) to 51% of GDP in high-income countries (OECD, 2017).

10. SMEs to International Economy
Contribution To Employment
As the main source of employment SMEs provide 70% of accounting job. And in the major
contributor for value creation up to 50-60% value added in average(Figure.2). In changing
economies, SMEs makes up to 45% of total employment and 33% of GDP, if informal SMEs is
taken to account SMEs would contribute more than half of the employment and GDP in most
low income countries. Although it provide a lot more jobs to the market however, SME is very
prone to failing up to 90% (Pratomo, 2016), resulting the employees to not have job security.

11. SMEs to International Economy
While not all SMEs are innovative, new and small firms are the driven force behind strong and life changing innovation that
are important for economics growth, however, SMEs are able to work outside the norm of regular corporation. SMEs are
able to take opportunity of technological or commercial opportunity that often to be neglected by corporation or turn to
public information. This can be seen, as SMEs are account to 20% of patents in innovation in biotech field at Europe alone.
SME also contribute in creation of value by adopting innovation that made in somewhere else and adapting it in different
context through changes and by supplying to a small and new market that customers need. SMEs also contribute by serving
underserved area that is not attractive to the larger firm.
While medium sized enterprises innovate and upgrade an innovate are the force behind growth of many OECD economies,
making and upgrading the participancy of smaller supplier in the supply chain. Such as, in Switzerland, medium-sized
enterprises (50-249 employees) contribute up to 4% of the business population, but have the responsibility of 23% of
employment and 25% of value added. In addition, many viable small enterprise in mid or low-tech sector that are able to
increase competitiveness in local market and generate innovation, big contribution to employment, social inclusion and
territorial cohesion. Alongside, many enterprise may not be able to go further than local market, this is because the ability
of the firm it self creating large amount of product is limited and does not have a strong driving force to expand resulting in
business to stay statute throughout their life.

12. National (Indonesia)
Economy

13. National (Indonesia) Economy
SMEs in Indonesia has a huge role in developing and sustaining economy. SMEs is accountable
for more than 99% of enterprise this resulting SMEs in indonesia (5654 million UMKM in
Indonesia) to be accountable for 97% of employing the population (Azisah, 2017). This leads to
SMEs to a more fair distribution of income and will make sure an increase of productivity with
better technology. The SMEs compete with local know-how technology and material, allowing
the SMEs to use more local ingredient. Resulting in lesser foreign exchange to take place, in
addition SMEs are relatively flexible in way that it can adapt to customer’s requirement. With
most SMEs to be self employed and without formally hired workers, most SMEs are low in
productivity, little to no usage of electronics resulting the product to be mostly low quality and
operate only in local markets. Although there are SMEs that able to sustain for long period of
time (Azisah, 2017).

14. SME to Java’s
(Regional) economy

15. SME to Java’s (Regional) economy
Based on the table above it can be seen that the Micro
business in West Java has the greatest amount out of all
the business throughout the years of 2008 to 2012. With
this, it can be show that Micro business play a huge role in
West Java (Pamella, 2014). Similarly in 2016, there are
9168 million of UMKM in West Java, making as the most
dominant and booster in the West Java’s economy
((EM/N-1), 2016). Therefore, showing that Java has a
very similar characteristic to Jakarta, indicating that
micro business can only contribute small portion of
income to the government, UMKM only contribute up to
0.5% (FAUZIA, 2018). It is not good in long run as
government would need income to build up more public

16. SMEs to Jakarta
(Local) Economies

17. SMEs to Jakarta (Local) Economies
Based on the data by 2012, there is 56 million of UMKM in indonesia. Around 55 million are
micro, 624.418 are small and 48.997 are medium business(Caesaron, 2014). Based on data
given it can be seen that compared to the other micro business has the largest amount in
Jakarta. This showed how Jakarta’s micro business played a huge role in the economy of
Jakarta's economy, with micro business taking over around 98% of UMKM sector. It could be
hypothesized with the size of UMKM in Jakarta, micro business is one of the biggest source of
employment in Jakarta. However, for capital earning Micro business may not play a big role to
Jakarta’s economy since their contribution in form of tax is not as big as medium and large
business, UMKM only contribute up to 0.5% (FAUZIA, 2018).