Baltic Journal of Economic Studies  

21

Vol. 2, No. 2, 2021
DOI: https://doi.org/10.30525/2661-5150/2021-2-4

THE MECHANISM OF STATE SUPPORT  
FOR SMALL BUSINESS DEVELOPMENT: SYNERGISTIC ASPECTS

Artem Degtiarov 1

Abstract. The purpose of this research is the development of theoretical foundations for the functioning of the 
mechanism of state support for small business in a decentralized government based on a synergistic approach. 
The subject of the study: theoretical and methodological foundations for the functioning of the mechanism of state 
support of small business in the context of synergetics. Research methodology is a set of principles, approaches, 
general theoretical, special, and interdisciplinary methods of scientific knowledge, namely morphological analysis, 
comparative analysis, methods of deduction and logical generalization, analysis and synthesis. Functioning 
of the mechanism of state support for small business is considered on the basis of a synergistic approach. The 
synergistic approach is one of the most effective methodological bases for the development of modern economics.  
The article considers the key theoretical provisions for understanding this approach, substantiates the possibility 
and feasibility of its application in the implementation of this mechanism in modern economic conditions. Results. 
It is determined that the reform of decentralization of power has led to the creation of institutional problems in the 
economic mechanism of state support for small business. In the regions and territorial communities, there is no single 
mechanism to support the development of small business, which causes the inefficiency of this area of public policy. 
This justifies the relevance of the use of new methodological approaches to the formation of the mechanisms for 
implementing the state policy of business regulation. The importance of small business for the development of the 
national economy, ensuring its stability, is substantiated, the main approaches to the essence of entrepreneurship 
are investigated. Theoretical aspects of the functioning of the mechanism of state support for small business on 
the basis of traditional and systemic approaches are systematized, their positive aspects and shortcomings are 
determined. It is substantiated that in the conditions of economic transformations and introduction of the reform 
of decentralization of power it is expedient to use the synergistic approach in the research of the mechanism of the 
state support of the small business. It is emphasized that the very synergistic approach is able to study the process 
of functioning of the mechanism of state support for small business on the basis of evolutionary development and 
self-organization of complex systems. We propose to consider the mechanism of state support in the conditions of 
decentralization as a process of self-organization of small business entities and public authorities, which is carried 
out through their interaction with the meso- and macroenvironment. Conceptual bases of the use of the synergistic 
approach in the research of the mechanism of the state support for the development of entrepreneurship and its 
economic levers are developed. It is substantiated that the application of a synergistic approach in the process 
of formation and application of the mechanism of state support of small business will allow to take into account 
interdependence of economic processes and phenomena, to investigate the interaction of local authorities and 
small businesses under decentralization. The use of a synergistic approach as a research method also makes it 
possible to take into account the dynamics of the state support mechanism. The synergistic methodology in the 
study of the mechanism of state support for small business allows to take into account the existence of connections 
and interactions between the components of the mechanism, as well as the integrity and ability to change. Based on 
a synergistic approach, it becomes possible to ensure the development of small businesses by preventing threats. 
The next advantage is the ability to take into account the alternative scenarios of small business development of a 
particular region or territory in a changing socio-economic environment. Consideration of the mechanism of state 
support as a self-organized system makes it possible to study the patterns of self-organization, which in the future 
should become the basis for calculating the synergistic effect of the mechanism.

Key words: state regulation, state support, decentralization, economic mechanism, economic levers, small business.

JEL Classification: В41, F63, L26

Corresponding author:
1 National University “Сhernihiv Polytechnics”, Ukraine.
E-mail: artemdeg@online.ua
ORCID: https://orcid.org/0000-0003-2665-2544



Baltic Journal of Economic Studies  

22

Vol. 2, No. 2, 2021

1. Introduction
Ukraine’s strategic goal is integration with the 

countries of the European Union due to which the 
country’s economy is becoming more open to foreign 
business partners every year showing an increased 
interest in small business. Given the relevance of small 
business for the development of the national economy 
and individual regions and territories, the public 
administration processes aimed at creating favorable 
conditions for its development become significantly 
important. In this regard, we consider it relevant the issue 
of providing effective state support for the development 
of small business on the basis of government interaction 
with business and communities, which is impossible 
without the development and implementation of 
an appropriate mechanism for state support for the 
development of business structures.

At present, the goal of the Ukrainian economy is to 
transit to the modernization of the public administration 
system, accompanied by the formation of new economic 
institutions, implementation of reforms in the field 
of state regulation based on decentralization, the use 
of leading mechanisms and instruments of public 
policy. However, the reform of the economic system, 
the decentralization of power led to the creation of 
institutional problems in the economic mechanism of 
state support for small business, cooperation of public 
administration and private property, which requires the 
use of new methodological approaches to the formation 
of mechanisms for implementing public policy on 
entrepreneurship.

The unsystematic state support is a consequence of 
the difference in the regional conditions of formation 
of small business institutions and insufficient 
consideration of the specifics of decentralization 
management, especially in the economic component. 
Each region forms a system of economic state 
support for small business, based on the ideas of 
local authorities, and there is no regulation on the 
formation of state support systems at the regional and 
territorial levels, which often slows down achieving the 
required level of business support. In the regions and 
territorial communities, there is no single mechanism 
to support the development of small business, which 
causes the inefficiency of this area of public policy and 
incoherence of support institutions. In addition, the 
theoretical aspects of the formation and improvement 
of the mechanism of state support for small business, 
taking into account the basics of the synergistic 
approach, are currently insufficiently disclosed. 
Some tools of this mechanism are not adapted to the 
conditions of system modernization and the formation 
of the information economy. Consequently, the aim of 
the article is to develop theoretical foundations for 
the functioning of the mechanism of state support 
for small business in decentralization in the context 

of a synergistic approach based on the principles of 
self-organization and the evolution of the mechanism’s 
potential. Achieving the goal requires the following 
tasks: determining the role of small business in the 
development of the national economy; studying 
the essence of entrepreneurship; determining the 
mechanism of state support for small business in the 
context of basic theoretical approaches; substantiating 
conceptual bases of use of the synergetic approach in 
the research of the mechanism of the state support 
for the development of business and its economic 
levers. The use of morphological and comparative 
analysis allows to specify conceptual and categorical 
apparatus, to explore approaches to the definition of 
“entrepreneurship”, “mechanism of state support”. 
Based on the method of analysis and synthesis, it 
becomes possible to study the evolution of these 
categories, to draw conclusions about the main 
theoretical provisions of the mechanism of state 
support for small business. The application of 
a synergistic approach makes it possible to explore this 
mechanism as a self-organizing system and provide 
suggestions for determining the effectiveness of the 
interaction of the components of the mechanism and 
their impact on economic development.

2. The essence of small business and its role  
in economic development

Entrepreneurship and, in particular, small business, 
is a complex phenomenon that operates on the basis of 
the interaction of economic, legal, social, market and 
other public relations. However, the impact of small 
business on the state of socio-economic development of 
countries is different: in the EU countries, the share of 
small business in GDP is 52-70%, and the share in total 
employment population – 55-82%, while, according 
to World Bank research, these figures in Ukraine are 
14.5-15.8% and 19.2-20.7%, respectively (The World 
Bank, 2020). According to S. Zahra, small business is 
a significant factor in socio-economic development, 
providing millions of jobs, offering a variety of goods 
and services, increasing national prosperity and 
competitiveness (Zahra, 1999). So, supporting the 
formation and development of the institution of small 
business at the expense of economic levers by public 
authorities is a priority of public policy in the context of 
reforms and compliance with the European integration 
course of economic development.

The initial stage of the study of the phenomenon 
of entrepreneurship characterizes it as an activity 
associated with risk and aimed at generating income. 
So, according to A. Smith, entrepreneurial activity 
enables a person to meet their needs through 
labor (Smith, 1962). Since the 19th century, as 
the development of entrepreneurial activity and 
the separation of functions of ownership and 



Baltic Journal of Economic Studies  

23

Vol. 2, No. 2, 2021
management, the essence of entrepreneurship has 
been considered in the context of the organization 
of production. For example, the economist  
J.-B. Say considers entrepreneurship in the focus of 
3 components: the economic concepts of “capital”, 
“land”, “labor” as key factors of production. In turn, the 
neoclassical theory ( J. Clark, A. Marshall, L. Walras) 
identifies entrepreneurship as a specific management 
function, and the entrepreneur acts as a manager 
who combines the factors of production (Mochernyi,  
2000). Starting from the middle of the 20th century, 
there is a prevailing approach in economics, according  
to which entrepreneurship is associated with innovation. 
J. Schumpeter sees the unique role of the entrepreneur 
in overcoming the inertia of the economic system and 
the desire of economic entities to act in accordance with 
sustainable practices (Schumpeter, 1982).

According to the Law of Ukraine “On Development 
and State Support of Small and Medium Business in 
Ukraine” (2012), small business entities in Ukraine 
are individuals and legal entities of any kind of 
organizational and legal form and form of ownership, 
in which the average number of employees for the 
reporting period does not exceed 50 people and the 
annual income from any activity does not exceed an 
amount equivalent to 10 million EUR at the average 
annual rate of the National Bank of Ukraine.

3. Defining the essence of the mechanism  
of state support for small business

The system of state support for small businesses 
in modern realities does not fully reflect the state 
of economic relations, which requires a wide range 
of instruments of state support in the direction of 
decentralization. According to Z. Varnalii, state 
support for small business is a set (complex) of priority 
solutions that determine the main directions and forms 
of legal, economic, and organizational assistance for 
the development of small entrepreneurship taking into 
account the interests of the state and business entities 
(Varnalii, 2002). Most researchers adhere to the 
following classification of means of state regulation of 
support for small business:
1) direct state influence, i.e., through the system of 
state procurement and state contracts, establishment 
of norms and standards, legislative acts, targeted 
comprehensive development programs;
2) indirect influence, i.e., through government loans, 
grants, tax benefits, subsidies, prices, etc. (Melnyk, 
2000).

The mechanism of state support and the use of 
economic instruments, namely debt financing with the 
use of bank loans, as well as forms of support aimed 
at maintaining employment, providing tax benefits, 
covering business costs, etc., has become relevant 
because of the pandemic challenges (Pichkurova, 2020). 

The priority is to analyze the category of the 
“mechanism” in the context of state regulation of small 
business development. O. Komiakov considers the 
mechanism of state regulation as a set of organizational 
and economic methods and tools that allow to perform 
functions for continuous operation of the studied  
system (the state) to improve the functional condition of 
the economic environment (Komiakov, 2000). Instead, 
M. Koretskyi considers the meaning of the concept 
of the “mechanism of state regulation” as a system of 
tools, levers, methods, and incentives through which 
the country regulates economic processes, as well 
as ensures the implementation of socio-economic 
functions (Koretskyi, 2004). In turn, L. Koval considers 
the mechanism of state regulation of business as a single 
organism with internal and external links with other 
mechanisms (Koval, 2011). A. Butenko (Butenko, 
2011) and L. Yavorska (Yavorska, 2013) emphasize the 
systemic and complex mechanism of state support for 
business.

Thus, the conducted research makes it possible 
to identify traditional and systemic approaches to 
determining the essence of the mechanism of state 
support for small business. Within the traditional 
approach, the mechanism of state support for small 
business is considered in the context of a set of 
public administration measures to support business.  
We consider it expedient to note that the disadvantage 
of this approach is the point impact on business, as 
well as insufficient involvement of public authorities in 
the implementation of the mechanism. The reviewed 
approach, as a rule, is realized through the system 
of normative regulation with the involvement of 
instruments of financial support.

The application of the systemic approach is based 
on a comprehensive study of the components of the 
mechanism and the relationships between them.  
The development of a state support mechanism 
in the context of a systemic approach allows for 
a comprehensive analysis of the system of state support 
but does not allow to determine the systemic effect, 
as it considers the mechanism as a sustainable system 
without taking into account aspects of improvement 
and change. On the other hand, the advantage of this 
approach is the consideration of state support for small 
business as an element of the higher-level system, 
namely the national economy, the effectiveness of 
which affects the functioning of small business entities 
at the regional level.

4. The synergistic approach in the study  
of the mechanism of state support  
for small business

The application of a synergistic approach in the 
process of formation and application of the mechanism 
of state support of small business will allow to take 



Baltic Journal of Economic Studies  

24

Vol. 2, No. 2, 2021
into account interdependence of economic processes 
and phenomena, to investigate the interaction of local 
authorities and small businesses under decentralization. 
This position is based on the theoretical and 
methodological principles of synergetics as a science 
that explores aspects of the emergence, interaction and 
evolutionary transformation of open self-organizing 
systems. For H. Haken, “… synergetics explores the 
combined action of many subsystems (mostly the 
same or several different species), which results in 
a macroscopic level of structure and corresponding 
functioning” (Haken, 1980). In this regard, the solution 
of the economic mechanism of state support of small 
business is associated with the feedback of the subject 
and the environment in the process of their interaction, 
and the mechanism of state support in decentralization is 
considered appropriate as a process of self-organization 
of small business and public authorities, which is carried 
out through their interaction with the meso- and 
macroenvironment.

As O. Mykhailovska notes, the synergistic approach 
is an approach in which a specific phenomenon or 
process is considered not in isolation, but in the context 
of the evolution of systems (Mykhailovska, 2011). The 
synthesis of systemic and synergistic approaches in the 
context of consideration of the economic mechanism 
of state support for small business allows to study 
its structure as a complex system of interconnected 
elements and to substantiate the principles and laws of 
functioning and development. Notably, state support 
is not only a mandatory function of the state for small 
business entities but a system of connections and tools 
to identify the most effective business representatives 
to address the strategic objectives of the national 
economy. This is possible within the framework of 
their integration to find optimal solutions, establish 
business cooperation and obtain a synergistic effect 
as the end result of the mechanism. The application 
of a synergetic approach also makes it possible to 
take into account the dynamics of the state support 
mechanism.

The synergy of the mechanism of state support for 
small business also involves the impact of economic 
levers and tools of the mechanism not only on the objects 
of management but also their operating environment. 
Consequently, the synergistic effect of the mechanism 
of state support for small business entities is the result 
of the interaction of its components, which can change 
the quality of the business environment and keep the 
economy on a certain trajectory of development by 
adapting to negative changes.

The functioning of the state support mechanism 
should be based on purpose, i.e., there must be some 
goals and specific priorities, which in the context 
of a synergistic approach should be reviewed in the 
light of economic and political external changes.  

This avoids duplication of state support tools at  
different levels of public administration. On the other 
hand, the purposefulness of the mechanism should also 
take into account the balance of interests of the national 
economy, economic entities and public authorities on 
the basis of economic levers. Improving the mechanism 
of state support in the context of decentralization is 
possible on the basis of effective interaction between 
business entities and public authorities.

The application of a synergistic methodology in 
operating the mechanism of state support of small 
business entities will allow to combine the main tools 
and economic levers that are currently used in each 
region but are not always effective enough.

The study of the synergistic aspects of the functioning 
of the mechanism of state support for small business 
development brought us the opportunity to identify 
the following conceptual principles of its functioning 
(Figure 1). 

The synergetic methodology explores the possibility 
of ensuring the development of small businesses by 
preventing threats and allows to take into account the 
alternative scenarios of small business development 
of a particular region or territory in a changing socio-
economic environment. In the context of nonlinear 
dynamics as the basis of synergistic methodology, 
the mechanism of state support for small business 
development is a complex hierarchical system, the 
interaction of elements of which (public authorities, 
businesses, levers, goals, objectives, tools) is based on 
self-organization. The dynamism of the mechanism 
gradually leads to a nonequilibrium state, which is 
called the “bifurcation point” in synergetics. According 
to the development theory, at this very point, there 
are several options for the evolution or change of the 
studied mechanism. Choosing one of the options allows 
the mechanism of state support as a system to evolve 
and achieve a steady state. The risk of the mechanism 
functioning and the increased level of uncertainty of the 
operating environment are observed with the distance 
from the steady state and the approach to the next 
bifurcation point.

This allows us to conclude that the availability of 
alternatives or attractors throughout the implementation 
of the state support mechanism requires monitoring 
the changes in external and internal factors and the 
introduction of necessary adjustments to the developed 
mechanism. This shows the ability of the mechanism 
of state support for small business development to self-
organization. It should also be borne in mind that in the 
process of formation and operation of the mechanism 
there may appear new characteristics and properties 
that must be taken into account when making corrective 
changes.

Thus, economic efficiency of the mechanism of 
state support for small business in the context of 



Baltic Journal of Economic Studies  

25

Vol. 2, No. 2, 2021

decentralization from the standpoint of a synergistic 
approach is provided by performing the following tasks:
– formation of a socio-economic environment that 
ensures the development of small business and 
individual business entities;
– financial provision of state support on the basis of 
decentralization of local budgets;
– availability of infrastructure services to business 
entities;
– expanding the powers of public authorities in the 
implementation of support for small business;
– ensuring cooperation between government and 
entrepreneurship, involvement of small businesses in 
the creation of the documents for development. 

5. Conclusions
Thus, the application of the synergistic methodology 

in the study of the mechanism of state support for small 
business allows: 

– to take into account the existence of connections 
and interactions between the components of the 
mechanism, as well as the integrity and ability to change;

– to study the patterns of self-organization, which in 
the future should become the basis for calculating the 
synergistic effect of the mechanism.

The implementation of the mechanism of state 
support for small business development requires the 
improvement of existing levers and the introduction 
of new economic methods and tools that in the 

Figure 1. Synergistic principles of the mechanism of state support for small business

Source: author’s development

It is considered as an open 
nonequilibrium system

There are different options for changing 
the components of the mechanism, 

so it is considered as an adaptive system

The implementation of the mechanism 
is based on the coordination 

of subsystems and individual elements

The presence of feedback between 
the components of the mechanism 

and the external environment

The ability of the mechanism to evolve

Elements of the mechanism are 
subordinated to the goal according 

the presence of coordinated interaction

The functioning of the mechanism 
is ensured by the exchange of resources 
with macro- and mesoeconomic systems

Mechanism 
of state 

support for 
small 

business



Baltic Journal of Economic Studies  

26

Vol. 2, No. 2, 2021
strategic perspective will contribute to the formation 
of a perfect system of business regulation in the context 
of decentralization reform. The functioning of the 
mechanism should be considered from the standpoint 
of dynamics and synergistic interaction between 

public authorities and the business entities. The study 
of feedback, the process of choosing alternatives in 
the implementation of the mechanism will determine 
the possibilities and directions of its further self-
organization.

References:
Butenko, А., Voinarenko, M., & Liashenko, V. (2011) Modernizatsiia mekhanizmiv rozvytku maloho ta seregnoho 
biznesu [Modernization of mechanisms for small and medium business development]. Donetsk. (in Ukrainian)
Haken, H. (1980). Sinergetica [Sinergetics]. Moscow: Mir. (in Russian)
Komiakov, O. (2000). Derzhavne rehuliuvannia perekhidnoi ekonomiky [State regulation of the transition 
economy] (PhD Thesis). Kyiv: Kyiv. nats. ekon. un-t. (in Ukrainian)
Koretskyi, M. (2004). Derzhavnyi іnstrumentarіi rehuliuvannia innovatsii rozvytku pidpryiemstv [State tools for 
regulating the innovative development of enterprises]. Visnyk Donetskoho derzhavnoho universutetu upravlinnia,  
vol. 3 (29), pp. 84–90. (in Ukrainian)
Koval, L. (2011). Pidtrymka pidpruiemnytstva v systemi derzhavnoho rehuliuvannia ekonomiky [Entrepreneurship 
support in the system of state regulation of the economy]. Formation of a market economy. Kyiv: Kyiv. nats. ekon. 
un-t. (in Ukrainian)
Melnyk, A. (2000). Upravlinnia rehionalnoiu ekonomikoiu [Management of regional economy]. Kyiv: KNEU.  
(in Ukrainian)
Mochernyi, S. (Ed.) (2000). Ekonomichna entsyklopediia [Economic Encyclopedia]. Kyiv: Publishing House 
“Academy”. (in Ukrainian)
Mykhailovska, O. (2011). Systemno-synerhetychnyi pіdkhіd u doslіdzhennі hlobalizatsiinykh transformatsii 
[System-synregetic approach in the study of globalization transformations]. Current economic problems, vol. 7, pp. 
40–50. (in Ukrainian)
Pichkurova, Z. (2020). Svіtova praktyka derzhavnoi pidtrymky maloho ta serednoho biznesu v umovakh pandemii 
COVID-19 [World practice of state support for small and medium business in the convention of the COVID-19 
pandemic]. Intelekt XXI, vol. 6, pp. 85–91. (in Ukrainian)
Pro rozvytok ta derzhavnu pidtrymku maloho ta serednoho pidpryiemnytstva v Ukrainі (2012). No. 4618-VI. 
Available at: http://zakon5.rada.gov.ua/laws/show/4618
Schumpeter, J. (1982) Teoriya ekonomicheskogo razvitiya [Theory of economic development]. Moscow: Progress. 
(in Russian)
Smith, А. (1962). Issledovaniya o prirode i prichinah bogatstva narodov [An inquiry into the nature and causes  
of the wealth of nations ]. Мoscow: Sotzeskiz. (in Russian)
The World Bank. Data catalog. Available at: http://data.worldbank.org
Varnalii, Z., & Kuznetsova, I. (2002) Derzhavna rehuliatorna polityka v sferі maloho pidpryiemnytstva [State 
regulatory policy in the field of small business]. Kyiv: NAS of Ukraine. (in Ukrainian)
Yavorska, L. (2013). Ekonomіko-pravovі tendentsii rozvytku maloho pidpryiemnytstva v Ukrainі [Economic and 
legal trends in the development of small business in Ukraine]. Bulletin of the National University “Yaroslav the Wise 
Law Academy of Ukraine”, vol. 2 (13), pp. 134–141. (in Ukrainian)
Zahra, S. (1999). The changing rules of global competitiveness in the 21st century. Academy of Management 
Executive, vol. 3, pp. 36–42.