One starting point for our research project “An Eternal Challenge? The State and Small Business Financing in Sweden, 1935-1970” is that an increased historical understanding is needed to improve the contemporary debate on small business finance policy. After the economic crises during the 1970s, most OECD countries have introduced programs for small businesses financing. The expected impact of such programs has often been that small business will grow through commercialization of technology and innovations, resulting in an overall transformation of the economy. In practice, however, such outcomes have only emerged to a limited extent. This has given rise to an industrial policy debate where analysts and scholars have tried to determine why such outcomes do not emerge and what additional steps and measures need to be taken to realize the expected potential. However, such analyses have hitherto only been exposed to historical perspectives to a very limited extent. This means that one important step to increase the historical understanding of small business funding policies is to work out the basic elements and foundations of the original policies which emerged during the post-war period.
The paper examines to what extent the post-war state funding of small business in Sweden reflected the “Varieties of Capitalism (VoC)” approach or the “historical alternatives to mass production” approach through a case study of the loan guarantee system for small business during the period 1945-1954. We find that the organization and implementation of this system reflected the path-dependent and complementary national institutional pattern emphasized by the VoC approach. In practice, it might be described as a scaled-down version of the general investment policy which meant that it did not offer the forms of flexibility and heterogeneity suggested by the historical alternatives approach. But while such perspectives were not transformed into actual policy, influential economic researchers continued to support them in the debate on investment policy. This meant that even though the change of small business policy towards entrepreneurship and innovation as a response to the economic crises of the 1970s built on established ideas and concepts, it still represented a radical policy shift to which firms and entrepreneurs needed a long time to adapt.