Retaining winners: Can policy boost high-growth entrepreneurship?

Abstract

We analysed the growth impact delivered by a high-growth entrepreneurship policy initiative over a six-year period. Using an eight-year panel that started two years before the initiative was launched and propensity score matching to control selection bias, we found that the initiative had more than doubled the growth rates of treated firms. The initiative had delivered a strong impact also on value-for-money basis. In addition to producing the first robust evidence on the growth impact delivered by a high-growth entrepreneurship initiative, we contribute to public sponsorship theory with the notion of capacity-boosting activities to complement previously discussed buffering and bridging activities

Myth-busting and entrepreneurship policy: the case of high growth firms

“…Much of the support which falls under the heading of support for 'high growth entrepreneurship' typically targets very young, early stage enterprises and young entrepreneurs (OECD 2013) as reflected in a range of publicly-funded business incubators and growth accelerators evident in most OECD economies (Smallbone et al 2002;OECD 2013). Plus, many high growth programmes, such as the NIY programme operated by Tekes in Finland, have explicit age criteria stipulating participant firm age which, in the case of Tekes, must be less than five or six years (Autio and Rannikko 2016). 3 Yet, given that many HGFs emerge out of well-established firms, much of the 'future HGF' base are not eligible for these programmes and fall outside the remit of business incubators, business planning and start-up services and small-scale (or seed) start up financing.…”

“…This emphasis is often reflected in programme eligibility criteria. For example, the aforementioned NIY programme operated by Tekes in Finland requires participants to have a minimum expenditure of 15% of turnover on R&D (Autio and Rannikko 2016). Similarly, the High Growth Start-up Unit operated by Scottish Enterprise has explicit eligibility criteria stating "your business needs to be commercialising potentially disruptive intellectual assets that are likely to achieve revenues of £5 million within five years".…”

“…Despite contributing only a small proportion of HGFs, high tech SMEs have been found to be the focus for a disproportionate range of available support options (Yoo et al 2012;Autio and Rannikko 2016). Many of the current support systems for SMEs focus on more generic interventions such as R&D assistance and financial support (OECD 2010), however firms operating in high-tech sectors of the economy are often able to access extra financial support from government programmes and higher education institutions for product design, technology development and innovation .…”

“…The NIY programme operated by Tekes seeks to connect local Finnish firms with external investors (Autio and Rannikko 2016), which is a similar approach to the famous and highly regarded Yozma programme in Israel . More imaginative approaches such as these are needed to help stimulate both the demand for -and supply of -finance within HGFs.…”

“…In recent years, HGFs have become something of the 'fixation' within enterprise policy and are widely perceived to be critical for economic development (Acs et al 2008;Shane 2009;Mason and Brown 2013;Bos and Stam 2014;Lee 2014;Autio and Rannikko 2016). According to some, it is hard to overstate the impact of Birch's original work on gazelles for policymaking organisations such as the US Small Business Administration (Welter et al 2016).…”