This is a good set of questions. I think the process of mergers and acquisitions, little fish feeding bigger fish, is pretty much an Iron Law as long as the context is the “open ocean”. What you need for small business to persist is something like a coral reef. One of my attempts to simulate this is the “Green Mall”. I have a little better description somewhere but all I can turn up at the moment is this http://almanac2010.wordpress.com/2011/09/07/the-green-union/

Another thing, which could be part of the same reef as the green mall, is the idea of a democratic worker-owned temp agency. This might help straddle the gap between employment-employment and self-employment. BTW solitary self employment is IMO the smallest part of the self-employment spectrum. All kinds of partnerships, cooperatives, and other kinds of associations are part of the spectrum of worker-owned democratic enterprises.

Even outside the coral reef you can have other kinds of niches and enclosures to buffer small fry from predators. Guilds, small business and cooperative associations and federations, etc. One metaphor I use is “circling the wagons”, which can be taken in a number of ways. The central idea is to create a large enough circle to support internal economic recirculation.