Ramaz Abesadze, D.Sc. (Econ.), professor, director of the Gugushvili Institute of Economics (Tbilisi, Georgia)

Eteri Kakulia, D.Sc. (Econ.), senior fellow at the Gugushvili Institute of Economics (Tbilisi, Georgia)


The former Soviet republics, including Georgia, achieved their state independence, which brought with it a multitude of problems. The former economic ties broke down and there was not enough qualified personnel to promote the development of a market economy, so many enterprises ceased to exist, and the countrys economy collapsed. The main task was to restructure the national economy.

The republics government did all it could to form a market economy in the country, but these attempts were not crowned by success. The population spontaneously launched into small business, but nor did this do anything to improve the economy.

World experience shows that small business can play a significant role in resolving many problems; it plays a vital part in reducing unemployment and strengthening economic stability as a whole. At the stage of the post-communist transformation the advantages of small business are most important and can be enhanced with the help of a streamlined mechanism of state support.

The Role and Importance of Small Business

Small business is important due to the influence it has on macroeconomic indices (GDP, employment, budget revenues and expenditures, import, export, inflation, and so on). Small business is one of the main sources for developing and stabilizing the economic system as a whole. It also provides a quick return on money invested. In developed countries, almost half of the able-bodied population is employed in small business; it accounts for approximately 50% of all the products manufactured in the country.

According to American specialists, small business is so vitally important for the economy because it creates jobs, introduces new technology and services, meets the needs of large corporations for specialized products and services, and creates a high level of specialization and cooperation among enterprises, as well as a highly efficient production climate. As practice shows, small businesses help to promote the introduction of innovations into the economy. This all clearly shows that small business is conducive to the wide-scale activation of labor resources in the economy. And this is the crux of its social role as a powerful means of macroeconomic stabilization.

There is an objective need for integration between small and big business in a market economy. In developed countries, the main forms of their interaction are as follows: leasing, subleasing, franchising, license agreements, and venture capital financing. Cooperation and.............................

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