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The ineffectiveness of entrepreneurship policy: is policy formulation to blame?

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Abstract

Entrepreneurship policy has been criticised for its lack of effectiveness. Some scholars, such as Scott Shane in this journal, have argued that it is ‘bad’ public policy. But this simply begs the question why the legislative process should generate bad policy? To answer this question this study examines the UK’s enterprise policy process in the 2009–2010 period. It suggests that a key factor for the ineffectiveness of policy is how it is formulated. This stage in the policy process is seldom visible to those outside of government departments and has been largely ignored by prior research. The application of institutional theory provides a detailed theoretical understanding of the actors and the process by which enterprise policy is formulated. We find that by opening up the ‘black box’ of enterprise policy formulation, the process is dominated by powerful actors who govern the process with their interests.

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Notes

  1. Policy documents tend to be vague in the terms they use. Enterprise, entrepreneurship, small and medium enterprises (SMEs), small business ownership and self-employment are terms used frequently and synonymously. In this study ‘enterprise policy’ denotes all entrepreneurship and SME policy aimed at fostering business start-up and growth rates (Audretsch and Beckmann 2007; BERR 2008). Entrepreneurship policy and SME policy are separate entities but have similar long-term visions. After studying different economies, Lundstrom and Stevenson (2005, p. 5) define entrepreneurship policy as being “aimed at the pre-start, the start-up and post-start-up phases of the entrepreneurial process…and has the primary objective of encouraging more people in the population to consider entrepreneurship as an option, to move into the nascent stage of taking the steps to get started and then to proceed into the infancy and early stages of a business.” In contrast, SME policy targets the existing population of enterprises, encompassing a range of support measures to promote their viability (Audretsch 2004). But in reality the lines between entrepreneurship policy and SME policy are often blurred. While there is considerable overlap, both have the same aim of enhancing economic prosperity. In the UK, both policies are collectively referred to as ‘enterprise policy’ (BERR 2008; Lenihan 2011); accordingly, this is the term used in this paper.

  2. As with many other concepts in the social sciences, ‘policy’ is an ambiguous term whose meaning has changed over the years (Sapru 2010). We adopt Parsons’ (1995, p. 14) definition of policy as “an attempt to define and structure a rational basis for action or inaction.” Policies are formulated by “authorities” who “engage in the daily affairs of a political system” (Easton 1965, p. 212). The policy-making process comprises several distinct stages, including agenda setting (policy formulation), specification of alternative actions (policy choices), authoritative choice of action (policy decision) and implementation (Kingdon 1984).

  3. This paper subscribes to DiMaggio (1988) and Fligstein’s (1997) concept of institutional entrepreneurs. These authors define institutional entrepreneurs as actors who have sufficient resources to create new institutions which serve their interests, and who display a range of social skills (Leca et al. 2008).

  4. The RDAs were abolished in March 2012, to be replaced by Local Enterprise Partnerships. The goal of Local Enterprise Partnerships is to assist in determining local economic priorities and leading economic growth and job creation.

  5. The term ‘policy-maker’ indicates the individuals who were interviewed, while the term ‘civil servant’ refers to the individuals involved in the participant observation stage of the research. Both formulate enterprise policy; however, the distinction better depicts the different data collection methods used in this study.

  6. The first named author undertook the interviews and the participant observation. Because of the subjective nature of the research and the methods employed, it was important that a description was given of how, when and where the field work of this study was carried out and how, when and where notes, journals and records were kept and organised. In doing so, issues regarding the critical reflection process on the self as a researcher, the human as instrument were addressed (Guba and Lincoln 1981). Reflexivity is the conscious experiencing of the self as both inquirer and respondent, as teacher and learner, as the one coming to know the self within the processes of research itself (Guba and Lincoln 2005). On a deeper level reflexivity allowed the researcher to question the methods and the theoretical framework they work within, and to validate and legitimise the decisions that were taken in undertaking the current study. We understood and accepted the competing versions of reality by providing accounts of researchers’ personal background, biases, preconceptions and research activities to improve the legitimation of the data (Brewer 2000).

  7. SM (PM9) and SM (CS4) were responsible for their team but during the collection of the primary data there was a changeover in position. During the interview period SM:PM9 was in this position, at the time of undertaking the participation observation, this position was then undertaken by SM:CS4.

  8. At the time this document was seen as the Government’s renewed enterprise vision to make the UK the most enterprising economy in the world and the best place to start and grow a business (BERR 2008). The White Paper’s policy proposals also saw the government successfully implement various recommendations from the Paper. For example, an Academy for Enterprise (headed by Peter Jones) was introduced and £30 million was committed to extend enterprise education.

  9. Stakeholders refer to non-governmental actors.

  10. Although this paper offers insights into the formulation of enterprise policy-making in only the UK context, similar research could be conducted in other European countries to provide a comparative understanding. Previous studies have highlighted the formulation of enterprise policy-making in different contexts. For example, Hülsbeck and Lehmann (2007) show that Bavarian policy-makers used the advantages and disadvantages of the past when formulating a new entrepreneurship policy. Furthermore, North and Smallbone (2006) undertook a study of various policies encouraging rural entrepreneurship and support for rural enterprise. The authors studied two areas in each of the following countries: Germany, Greece, Poland, Portugal and the UK and undertook interviews with people who were involved in the formulation of these policies. Their findings highlight “marked differences between the five countries in terms of the degree to which they have developed policies for encouraging entrepreneurship and enterprise” and it would appear that the “majority of the examples of successful policy initiatives come from the more developed northern countries” (North and Smallbone 2006, p. 58). Also Stevenson and Lundstrom (2007) describe a typology of the different approaches to enterprise policy adopted by various governments, indicating considerable diversity in the formulation of enterprise policy. For example, in Italy they found that the government formulates targeted entrepreneurship policy around specified groups of the population (known as niche entrepreneurship policy). Given these studies, an assessment of enterprise policy-making at different country levels, at a more in-depth level would provide an interesting extension or replication of this study.

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Authors and Affiliations

  1. School of Management and Languages, Heriot-Watt University, Edinburgh, EH14 4AS, UK

    Norin Arshed

  2. Strathclyde Business School, University of Strathclyde, 199 Cathedral Street, Glasgow, G4 0QU, UK

    Sara Carter

  3. Adam Smith Business School, University of Glasgow, Glasgow, G12 8QQ, UK

    Colin Mason

Authors
  1. Norin Arshed
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  2. Sara Carter
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  3. Colin Mason
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Correspondence to Norin Arshed.

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Arshed, N., Carter, S. & Mason, C. The ineffectiveness of entrepreneurship policy: is policy formulation to blame?. Small Bus Econ 43, 639–659 (2014). https://doi.org/10.1007/s11187-014-9554-8

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