Creating good public policy to support high-growth firms

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 scholarswho havemade 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

Are high-growth firms overrepresented in high-tech industries?

“…As mentioned above, many policies for promoting HGFs are strongly connected to R&D and high-tech sectors (Coad and Rao 2010;OECD 2010;Mason and Brown 2013). In view of this, the policy implications of our results are troubling because they suggest that the relationship between R&D and high growth is, at best, highly complex but is most likely negative.…”

“…However, as Mason and Brown (2013) note, the only practical policy advice Shane provides on how to achieve this object is to extend existing schemes that provide financial incentives for small firms to undertake R&D, e.g., R&D tax credits. Furthermore, the more general concern that firms may be underinvesting in R&D has resulted in government policies such as favorable fiscal treatment and R&D subsidies (Coad and Rao 2010).…”

“…For this reason, Mason and Brown (2013) argue that government policies to promote HGFs focus too narrowly on high-technology industries and should be re-directed to also include other industries (see also ).…”

Suboptimal Size: Factors Preventing the Growth of Russian Small and Medium-Sized Enterprises

“…2 This situation is confirmed by the conclusions of a mounting body of research on entrepreneurship in emerging economies [Manev, Manolova, 2010;Ojala, Isomaki, 2011]. However, in contrast to SMEs in developed economies, which face challenges mainly in achieving high rates of growth [Lee, 2014;Mason, Brown, 2013], the SMEs in transitioning economies, especially in Russia, struggle to grow at all [OECD, 2015;Welter, Smallbone, 2011;Smallbone et al, 2014]. Moreover, keeping in mind that this sector, especially as far as manufacturing is concerned, is heterogeneous and consists of quite a diverse population of firms -new entrepreneurial firms vs. former Soviet enterprises [Chepurenko, 2015] -we Golikova V.,Kuznetsov B., might expect quite different patterns in their development as regards growth, downsizing or stagnation.…”

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“…2 This situation is confirmed by the conclusions of a mounting body of research on entrepreneurship in emerging economies [Manev, Manolova, 2010;Ojala, Isomaki, 2011]. However, in contrast to SMEs in developed economies, which face challenges mainly in achieving high rates of growth [Lee, 2014;Mason, Brown, 2013], the SMEs in transitioning economies, especially in Russia, struggle to grow at all [OECD, 2015;Smallbone et al, 2014]. Moreover, keeping in mind that this sector, especially as far as manufacturing is concerned, is heterogeneous and consists of quite a diverse population of firms -new entrepreneurial firms vs. former Soviet enterprises [Chepurenko, 2015] -we Golikova V., Kuznetsov B., might expect quite different patterns in their development as regards growth, downsizing or stagnation.…”