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Creating good public policy to support high-growth firms

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Abstract

Writing in Small Business Economics Scott Shane argues that policy-makers should stop subsidising start-ups and instead focus on supporting the small subset of new businesses with high growth potential. However, both Shane and other scholars who have made the same argument only offer broad-brush proposals to achieve this objective. The aim of this article, in contrast, is to engage in a detailed discussion of how to create appropriate policies for high-growth firms (HGFs). Drawing on research in Scotland, we argue that policy-makers are looking for HGFs in the wrong places. The heterogeneous nature of HGFs in terms of sector, age, size and origins makes in impractical to target support on particular sectors, technologies or types of firms (e.g., new or R&D intensive). The article proposes a reorientation of HGFs, both in terms of appropriate targeting and forms of support. Public policy also needs to focus on the retention of HGFs which are acquired by non-local businesses. Finally, policy-makers need to properly reflect upon the specificities of their entrepreneurial environment when devising appropriate policy interventions.

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Notes

  1. The precise definition of a HGF used during this research project is the one recommended by the OECD: “enterprises with average annualised growth in employees or turnover greater than 20% per annum, over a three year period, and with more than 10 employees in the beginning of the observation period, should be considered as high growth enterprises” (2010, p. 16).

  2. The interviews explored a wide range of topics, including founding circumstances; backgrounds of founder(s) and management team; activities; markets; sources of competitive advantage; patterns of growth; barriers to growth; financing; links to universities; and impact of government (as customer, regulation and deregulation, direct assistance).

  3. The one management buy-in in the sample of Scottish sample of HGFs was funded by an angel group specialising in small MBI investments.

  4. We are grateful to Suzanne Mawson for suggesting the term ‘solution provider’.

  5. One entrepreneur described a scheme to support internationalisation which involved engaging with companies that were already engaged in international markets as “aspirational” and “inspirational”.

  6. This is the objective of Scotland’s Entrepreneurial Exchange, Scotland's leading members' organisation for ambitious, growth-orientated entrepreneurs. It was created 'for entrepreneurs, by entrepreneurs' (http://www.entrepreneurial-exchange.co.uk/).

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Acknowledgments

The authors would like to thank Scottish Enterprise for funding the study of high-growth firms in Scotland. Earlier versions of the paper were presented at the New Zealand Centre for SMEs Annual Research and Policy Symposium (2 September 2010) and The European Policies Research Centre, University of Strathclyde (16 February 2011). We are pleased to acknowledge the helpful comments that we received from these audiences. The usual disclaimer applies.

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  1. Hunter Centre for Entrepreneurship, Hunter Centre for Entrepreneurship, Strathclyde Business School, 199 Cathedral Street, Glasgow, G4 OQU, UK

    Colin Mason

  2. Scottish Enterprise, Atrium Court, 50 Waterloo Street, Glasgow, G2 6HQ, UK

    Ross Brown

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Mason, C., Brown, R. Creating good public policy to support high-growth firms. Small Bus Econ 40, 211–225 (2013). https://doi.org/10.1007/s11187-011-9369-9

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