By Marcus Leach

Research from Strathclyde Business School — published in Small Business Economics (Springer) - suggests that policy-makers are looking in the wrong places in their efforts to promote more high growth firms — so-called gazelles.

Professor Colin Mason of Strathclyde’s Hunter Centre, who co-authored the paper with Dr Ross Brown, is proposing five ways in which the Government could productively intervene to increase the number of high growth firms.

In most countries high growth policies are focused on innovation support with schemes to support young technology businesses and commercialising university research through spin-offs.

However, research on high growth companies in Scotland challenges this strong link between technology-based firms and high growth.

“The most remarkable feature of our study of Scottish high growth firms is their enormous variety” says Professor Mason. The study found high growth firms amongst all ages and sizes of firms and they were not confined to any particular industry sectors.

The very small number of high growth firms in technology sectors and the virtual absence of university spin-offs is also noteworthy. Mason says that “this should prompt policy-makers to question whether commercialisation policies — at least in their present form - are an effective means of stimulating the emergence of high growth firms”

The study also emphasises that by no means all high growth firms begin as conventional start-ups — many have actually emerged out of existing businesses, notably through management buy-outs and management buy-ins

“The obvious conclusion”, says Mason, “is that it is dangerous to adopt policies which pre-judge where high growth firms will emerge. Our findings provide the Government with five ways of intervening which could lead to a dramatic increase in the number of such firms.”

“First, ensure eligibility rules for support are flexible. Even restricting support to manufacturing is unwise because many high growth firms have ‘product-as-service’ business models in which a package of services is built around a product (e.g. consultancy, design and build, installation, maintenance, training).”

“Second, find ways to stimulate MBO and MBI activity. There are lots of potential growth businesses ‘imprisoned’ within large businesses that would flourish if they were independently owned and managed.” Mason suggests that some of the public funding that supports start-up and early growth firms could be redirected to support small MBO funds.

“Third, re-think the emphasis on university commercialisation initiatives. Our research confirms other studies that high growth firms rarely have their origins in universities.” “Too much support is based on ‘technology-push’” says Mason “Instead there needs to be much more emphasis on support for technologies that can demonstrate market potential.

“Fourth, the standard business support tool kit is less appropriate to the needs of high growth firms, especially once they are beyond the start-up stage. They are more likely to benefit from relationship support which enables assistance to be tailored to their specific needs.

“Finally, it is a fact of life that many high growth firms will end up being acquired by bigger businesses, especially if they have raised venture capital. So policy-makers must ensure that high growth firms are anchored and embedded and so less amenable to being uprooted and moved elsewhere. This suggests some kind of pro-active aftercare service to local companies that have been acquired”.

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